Tag Archives: Bank of Arizona

They are the best business minds in Arizona. They are innovators, trailblazers and leaders of industry.

They are Az Business magazine’s Most Influential Women in Arizona Business for 2015, as selected by the editorial team at Az Business magazine and a panel of industry experts.

“While their resumes and career paths may differ, the women we selected have all procured influence in their respective fields through hard-earned track records of profitability, business ethics and leadership,” said AZ Big MediaPublisher Cheryl Green. “Az Business magazine is proud to congratulate the women who earned the right to call themselves one of the Most Influential Women in Arizona Business. They are changing the face of Arizona business.”

In addition to the Most Influential Women in Arizona Business, Az Business also selects five “Generation Next” women who are making an impact on Arizona, even though they are less than 40 years old. Those women selected for 2014 are:

Denyse Airheart, interim director of economic development, City of Maricopa

Jessica Benford, shareholder, Ryley Carlock & Applewhite

Dr. Ivana Dzeletovic, Banner MD Anderson Cancer Center

Stephanie Parra, executive director, T.W. Lewis Foundation

Teresa M. Pilatowicz, of counsel, Garman Turner Gordon

To select the best and brightest women to recognize each year, the editor and publisher of Az Business magazine compile a list of almost 1,000 women from every facet of Arizona’s business landscape — banking, law, healthcare, bioscience, real estate, technology, manufacturing, retail, tourism, energy, accounting and nonprofits. Once that list is compiled, we vet the list, narrow it down to about 150 women who we feel are most deserving, and then submit the list to 20 of their peers — female leaders from a variety or industries — and ask them to vote. If they want to vote for someone whose name is not on the list of those submitted for consideration, voters are invited to write in the names of women who they think deserve to members of this exclusive club.

Az Business also does not allow a woman to appear on the list most than once.

One of the leaders of both the Association for Corporate Growth’s Arizona Chapter and the Valley banking community is being recognized with a prestigious honor.

ACG has named Christine Nowaczyk, Senior Vice President for Bank of Arizona and former President of ACG-Arizona, as a recipient of the 2015 Meritorious Service Award. The award is the highest honor ACG bestows on its members, with Nowaczyk being one of just seven recipients this year out of the more than 14,000 ACG members globally.

Nowaczyk will receive the honor at the 2015 Intergrowth Conference, ACG’s signature global event, which will be held in April in Orlando, Florida.

In a letter to Nowaczyk, ACG’s Chairman of the Board, Doug Tatum, wrote, “This award is a symbol of the admiration and esteem in which you are held by your peers and is the highest honor we award. I want to join them in saluting you for your leadership and contribution to ACG. Because of you, ACG is stronger, healthier and more valuable to members than ever before.”

Nowaczyk said she was surprised and gratified by the recognition, and pleased to join the company of such a select group of leaders in ACG worldwide.

“I am very humbled to be recognized with the Meritorious Service Award by ACG,” she said. “While this is an individual award, it was made possible by the many people in ACG-Arizona who have worked tirelessly to advance the organization and its goals for economic growth and development over the years. I would like to thank my colleagues in the organization locally as well as at Bank of Arizona for their support over the years, and would also like to thank ACG for this recognition.”

Nowaczyk leads Bank of Arizona’s corporate banking line of business. In this role, Christine’s team of professionals advise companies on capital and operating strategies and deliver a full array of banking solutions including debt, syndications, treasury, institutional brokerage and corporate trust services. Christine serves on the Bank of Arizona Advisory Board, is a member of the Bank’s senior leadership team and represents the organization in the community.

Sanat Patel, current President of ACG-Arizona, said Nowaczyk’s award is extremely well-deserved.

“Christine has been a great friend and professional who has greatly advanced ACG-Arizona in our business community,” Patel said. “I can think of no one more deserving of such recognition, and on behalf of the Board of Directors of ACG-Arizona, I wholeheartedly congratulate Christine for this honor.”

Founded in 1954, the Association for Corporate Growth (ACG) is a global association for professionals involved in corporate growth, corporate development, and mergers and acquisitions. Today ACG stands at more than 14,000 members from corporations, private equity, finance, and professional service firms representing Fortune 500, Fortune 1000, FTSE 100, and mid-market companies in 56 chapters in North America, Europe, and Asia. The Arizona chapter of ACG includes representatives from corporate investment and private equity groups, financiers, venture capitalists and supporting consultant services. For more information, visit www.acg.org/arizona.

Bank of Arizona is part of BOK Financial Corporation, a $29 billion regional financial services company based in Tulsa, Okla. The company’s stock is publicly traded on NASDAQ under the Global Select market listings (symbol: BOKF). BOK Financial’s holdings include BOKF, NA, BOSC, Inc. and The Milestone Group, Inc. BOKF, NA operates the TransFund, Cavanal Hill Investment Management, MBM Advisors and seven banking divisions: Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust. Through its subsidiaries, the company provides commercial and consumer banking, investment and trust services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

With more than 30 years of professional experience in the banking industry, Ralston has overall responsibility for market leadership in Arizona. He is currently on the board of the Phoenix Children’s Hospital Foundation.

Biggest challenge: “Early in my career I found myself reporting to an individual I did not respect on a personal or professional level. Rather than leave the company, I chose to stay and focus on doing the best job I could. Within a year my supervisor was terminated and I assumed his position.”

Best advice received: “Work hard, have a positive attitude, and treat people like you want to be treated. Advice I received from my father early in my professional career.”

Best advice to offer: “Stay disciplined in your approach to credit metrics and credit standards. Straying from those will only lead to regret.”

Greatest accomplishment: “Acquiring a $140 million community bank in 2005 and transitioning it over eight years into a nearly billion dollar bank with incredibly talented people.”

BOK Financial Corporation, parent company of Bank of Arizona, reported record net income of $351.2 million or $5.13 per diluted share for the year ended December 31, 2012, up $65.3 million or 23% over 2011. Net income for the year ended December 31, 2011 was $285.9 million or $4.17 per diluted share.

“BOK Financial’s results for 2012 reflect the value of our diversified revenue business model,” said President and CEO Stan Lybarger. “Non-interest revenue increased by $103 million or 20% over 2011, led by tremendous growth in mortgage banking revenue. Our mortgage banking professionals originated over $3.7 billion in loans, assisting a record number of customers in the purchase or refinance of their home during this year. In addition to mortgage banking revenue, brokerage and trading revenue was up nearly $23 million over the previous year, which more than offset the full year effect of regulatory limits on interchange fees.”

“Our commercial loan portfolio grew by $1.1 billion or 16% and deposits grew by $2.4 billion or 13% over December 31, 2011,” said Lybarger. “Additionally, continued improvements in credit quality in 2012 required us to further reduce our combined allowances for credit losses by $45 million through net charge-offs and a $22 million negative provision for credit losses.”

“While persistently low interest rates and modest economic growth present a challenge for all banks, including BOK Financial, we expect the Company to continue to perform well,” said Lybarger. “Our outlook for the upcoming year includes continued loan growth, increased non-interest revenue and operating expense discipline.”

Net income for the fourth quarter of 2012 totaled $82.6 million or $1.21 per diluted share, compared to net income of $87.4 million or $1.27 per diluted share for the third quarter of 2012 and net income of $67.0 million or $0.98 per diluted share for the fourth quarter of 2011.

Highlights of fourth quarter of 2012 included:
• Net interest revenue totaled $173.4 million for the fourth quarter of 2012 compared to $176.0 million for the third quarter of 2012. Net interest margin was 2.95% for the fourth quarter of 2012 and 3.12% for the third quarter of 2012. Securities portfolio yield continued to decline as cash flows were reinvested at lower rates.
• Fees and commissions revenue totaled $165.8 million, largely unchanged compared to the third quarter of 2012. Mortgage banking revenue decreased $3.9 million compared to the prior quarter primarily due to seasonal decreases in mortgage commitments and mortgage loans held for sale. Trust fees and commission revenue increased $2.4 million over the prior quarter. All other revenue sources were up $1.3 million over the prior quarter.
• Operating expenses, excluding changes in the fair value of mortgage servicing rights, totaled $226.8 million, up $14.0 million over the previous quarter. Personnel expense increased $8.4 million. Non-personnel expense increased $5.6 million.
• A $14.0 million negative provision for credit losses was recorded in the fourth quarter of 2012. Improving charge-off trends resulted in lower estimated loss rates. Most economic factors are stable or improving in our primary markets. No provision for credit losses was recorded in the third quarter of 2012. Net charge-offs totaled $4.3 million or 0.14% of average loans on an annualized basis in the fourth quarter of 2012 compared to net charge-offs of $5.7 million or 0.19% of average loans on an annualized basis in the third quarter of 2012. Gross charge-offs continue to decline, down $921 thousand from the previous quarter.
• The combined allowance for credit losses totaled $217 million or 1.77% of outstanding loans at December 31, 2012 compared to $236 million or 1.99% of outstanding loans at September 30, 2012. Nonperforming assets totaled $277 million or 2.23% of outstanding loans and repossessed assets at December 31, 2012 and $264 million or 2.21% of outstanding loans and repossessed assets at September 30, 2012. Nonperforming assets increased $31 million due to the implementation of recent regulatory guidance concerning borrowers who have filed for Chapter 7 bankruptcy. Excluding the impact of this new guidance, nonperforming assets decreased $19 million during the fourth quarter of 2012.
• Outstanding loan balances were $12.3 billion at December 31, 2012, up $479 million over the prior quarter. Commercial loan balances grew by $351 million or 19% on an annualized basis over September 30, 2012. Commercial real estate loans grew by $68 million, residential mortgage loans grew by $32 million and consumer loans grew by $28 million.
• Period end deposits totaled $21.2 billion at December 31, 2012 compared to $19.1 billion at September 30, 2012. Demand deposit accounts increased $1.2 billion and interest-bearing transaction accounts increased $885 million, partially offset by a $54 million decrease in time deposits.
• Tangible common equity ratio was 9.25% at December 31, 2012 and 9.67% at September 30, 2012. The tangible common equity ratio is a non-GAAP measure of capital strength used by the Company and investors based on shareholders’ equity minus intangible assets and equity that does not benefit common shareholders. The Company and its subsidiary bank continue to exceed the regulatory definition of well capitalized. The Company’s Tier 1 capital ratios, as defined by banking regulations, were 12.78% at December 31, 2012 and 13.21% at September 30, 2012.
• The Company paid a regular quarterly cash dividend of $26 million or $0.38 per common share and a special cash dividend of $68 million or $1.00 per common share during the fourth quarter of 2012. On January 29, 2013, the board of directors approved a quarterly cash dividend of $0.38 per common share payable on or about March 1, 2013 to shareholders of record as of February 15, 2013.

Net interest revenue decreased $2.7 million compared to the third quarter of 2012. Net interest margin was 2.95% for the fourth quarter of 2012 compared to 3.12% for the third quarter of 2012.

The yield on average earning assets decreased 17 basis points compared to the prior quarter. The available for sale securities portfolio yield decreased 28 basis points to 2.10% due primarily to the continued reinvestment of cash flows from the portfolio at lower current rates. The loan portfolio yield of 4.33% was unchanged compared to the previous quarter.

“In the present low interest rate environment, our ability to further decrease funding costs is limited,” said Steven Nell, Chief Financial Officer. “In addition, our ability to bolster near term net interest revenue through continued securities portfolio growth may be constrained by our conservative approach to interest rate risk management. We intend to focus on supporting net interest revenue through continued loan portfolio growth. Based on the current interest rate environment, we see continued pressure on net interest margin in 2013.”

Average earning assets increased $741 million during the fourth quarter of 2012. The average balance of the available for sale securities portfolio increased $424 million over the third quarter of 2012 due primarily to growth in residential and commercial mortgage-backed securities issued by U.S. government agencies. Average outstanding loans increased $250 million due primarily to a $209 million increase in commercial loan balances.

Average deposits increased $1.4 billion over the previous quarter. Demand deposit balances were up $787 million and interest-bearing transaction account balances increased $624 million. Time deposit account balances decreased $59 million. The average balance of borrowed funds decreased $328 million compared to the third quarter of 2012.

Fees and Commissions Revenue
Fees and commissions revenue totaled $165.8 million, largely unchanged compared to the third quarter of 2012. Increased revenue from an acquisition made during the third quarter was mostly offset by decreased mortgage banking revenue.

Mortgage banking revenue totaled $46.4 million, down $3.9 million from the prior quarter. Record mortgage loan production volume during the fourth quarter was offset by a seasonal decrease in mortgage loan commitments and loans held for sale. Residential mortgage loans funded for sale totaled $1.1 billion for the fourth quarter of 2012, up $27 million or 3% over the previous quarter. Refinanced mortgage loans were 62% of loans originated for sale in the fourth quarter of 2012 compared to 61% of the loans originated for sale in the third quarter of 2012. Outstanding mortgage loan commitments decreased $95 million and the unpaid principal balance of loans held for sale decreased $25 million compared to September 30, 2012.

“Despite some industry forecasts of a reduction in mortgage lending activity, we expect our mortgage banking revenue to remain strong in 2013,” said Nell. “During 2012, we increased the number of mortgage lenders, expanded further into our regional markets and added correspondent loan origination channels. In addition, it does not appear that government policies that stimulate mortgage lending will end anytime soon. We also expect continued revenue growth from our wealth management business in 2013 through a full year’s performance from our Milestone acquisition and further expansion throughout our regional markets.”

Trust fees and commissions revenue were up $2.4 million primarily related to revenue from The Milestone Group, Inc., a Denver-based Registered Investment Adviser acquired by BOK Financial in the third quarter. Brokerage and trading revenue increased $697 thousand, transaction card revenue increased $221 thousand and deposit service charges and fees decreased $974 thousand.

Operating Expenses
Total operating expenses were $222.1 million for the fourth quarter of 2012 compared to $222.3 million for the third quarter of 2012. Excluding changes in the fair value of mortgage servicing rights, operating expenses totaled $226.8 million, up $14.0 million over the third quarter of 2012.

Personnel costs increased $8.4 million over the third quarter of 2012 due largely to increased incentive compensation and health care costs. Incentive compensation expense increased $5.8 million. Stock-based incentive compensation expense increased $4.8 million primarily due to increased incentive compensation accruals for executive compensation plans. Cash-based incentive compensation, which rewards employees as they generate business opportunities for the Company by growing loans, deposits, customer relationships or other measurable metrics, increased $1.0 million. Employee health care costs increased $3.0 million over the third quarter of 2012 primarily due to an increased level of large dollar claims.

Non-personnel expense increased $5.6 million over the third quarter of 2012. During the fourth quarter, the Company made a $2.1 million discretionary contribution to the BOKF Foundation. The BOKF Foundation partners with various charitable organizations to support needs within our communities. All other non-personnel expenses were up $3.5 million over the previous quarter.

Loans, Deposits and Capital
Loans
Outstanding loans at December 31, 2012 were $12.3 billion, up $479 million over September 30, 2012. All categories of loans experienced growth during the fourth quarter.

Outstanding commercial loan balances grew by $351 million or 19% on an annualized basis over September 30, 2012. Outstanding balances were up in most geographic markets, including $133 million in Oklahoma, $125 million in Texas, $46 million in Kansas/Missouri and $33 million in Colorado. Service sector loans grew by $134 million primarily in the Texas and Oklahoma markets. Energy sector loans increased $57 million. Energy sector loans grew primarily in the Oklahoma and Colorado markets, partially offset by a decrease in the Texas market. Healthcare sector loans increased $56 million primarily in the Texas market. Wholesale/retail sector loans increased $55 million primarily in the Texas and Kansas/Missouri markets, partially offset by a decrease in the Oklahoma market. Other commercial and industrial sector loans increased $33 million and manufacturing sector loans increased $18 million both primarily in the Oklahoma market. Unfunded energy loan commitments increased $170 million during the fourth quarter to $2.4 billion. All other unfunded commercial loan commitments totaled $3.2 billion at December 31, 2012, up slightly from September 30, 2012.

Commercial real estate loans were up $68 million over September 30, 2012. Loans secured by industrial properties increased by $59 million primarily in the Texas market. Other real estate loans increased $24 million. Growth in the Oklahoma and Colorado markets was partially offset by a decrease in the Texas market. Loans secured by office buildings were up $20 million primarily due to growth in the Texas market, partially offset by a decrease in loans attributed to the Oklahoma market. Growth in these loan classes was partially offset by a $40 million decrease in construction and land development loans primarily in the Oklahoma, Texas and Colorado markets. Unfunded commercial real estate loan commitments totaled $621 million at December 31, 2012, up $47 million over September 30, 2012.

Consumer loans increased $28 million from September 30, 2012. Other consumer loans were up $40 million over September 30, 2012, partially offset by a $13 million decrease primarily related to continued runoff of indirect automobile loans resulting from the previously announced decision to curtail that business in favor of a customer-focused direct approach to consumer lending. Approximately $35 million of indirect automobile loans remain outstanding at December 31, 2012.

Deposits
Deposits totaled $21.2 billion at December 31, 2012 compared to $19.1 billion at September 30, 2012. Demand deposit balances increased $1.2 billion. Interest-bearing transaction account balances increased $885 million and time deposits decreased $54 million. Among the lines of business, commercial deposits increased $1.1 billion, wealth management deposits increased $599 million and consumer deposits increased $80 million. Energy, commercial real estate, treasury services and small business customer account balances all increased over the prior quarter. Commercial customers continue to maintain high account balances due to continued economic uncertainty and persistently low yields available on high-quality investment alternatives. A significant driver of deposit growth in the fourth quarter was sales of businesses or assets by customers. During the first half of January 2013, demand deposit balances decreased by approximately $700 million as customers redeployed these funds.

The temporary unlimited deposit insurance coverage program for noninterest-bearing transaction accounts at all FDIC-insured institutions provided for by the Dodd-Frank Wall Street Reform and Consumer Protection Act expired on December 31, 2012. Noninterest-bearing transaction accounts are now insured up to $250,000.

Capital
The Company and its subsidiary bank exceeded the regulatory definition of well capitalized at December 31, 2012. The Company’s Tier 1 capital ratio was 12.78% at December 31, 2012 and 13.21% at September 30, 2012. The total capital ratio was 15.13% at December 31, 2012 and 15.71% at September 30, 2012. In addition, the Company’s tangible common equity ratio, a non-GAAP measure, was 9.25% at December 31, 2012 and 9.67% at September 30, 2012. Unrealized securities gains added 48 basis points to the tangible common equity ratio at December 31, 2012. The decrease in Tier 1, total and tangible common equity ratios was largely due to the $1.00 per share special dividend paid in the fourth quarter.

“BOK Financial has increased cash dividends each year since paying its first quarterly cash dividend in 2005,” said Nell. “We will consider migrating toward a higher regular dividend payout ratio in the future, subject to attractive capital deployment opportunities.”

In June 2012, banking regulators issued a Notice of Proposed Rulemaking that will incorporate Basel III capital changes for substantially all U.S. banking organizations. If adopted as proposed, these changes will establish a 7% threshold for the Tier 1 common equity ratio consisting of a minimum level plus a capital conservation buffer. BOK Financial’s Tier 1 common equity ratio based on the existing Basel I standards was 12.59% as of December 31, 2012. Our estimated Tier 1 common equity ratio under a fully phased in Basel III framework is approximately 12.15%, nearly 515 basis points above the 7% regulatory threshold. This estimate is subject to interpretation of rules that are not yet final. Additionally, the proposed definition of Tier 1 common equity includes unrealized gains and losses on available for sale securities which will vary based on market conditions.

Credit Quality
Nonperforming assets increased $13 million during the fourth quarter of 2012 to $277 million or 2.23% of outstanding loans and repossessed assets at December 31, 2012. Excluding the impact of recent regulatory guidance that primarily affected residential mortgage loans, nonperforming assets decreased $19 million. Implementation of this guidance increased nonperforming assets by $31 million in the fourth quarter.

The Office of the Comptroller of the Currency issued interpretive guidance in the third quarter of 2012 regarding accounting for and classification of retail loans to borrowers who have filed for Chapter 7 bankruptcy. This guidance requires that these loans be charged-down to collateral value and classified as nonaccruing and troubled debt restructurings, regardless of current payment status. We have generally been complying with this guidance by charging down such loans to collateral value. Implementation of this guidance in the fourth quarter did not significantly affect charge-offs or provision for credit losses. Nonaccruing loans increased by approximately $19 million. At December 31, 2012, payments on approximately 65% of these newly-identified nonaccruing loans are current. Most of this increase in nonaccruing loans is attributed to residential mortgage loans in the Oklahoma market. Implementation of this guidance also increased renegotiated residential mortgage loans guaranteed by U.S. government agencies by $12 million.

Nonaccruing loans totaled $134 million or 1.09% of outstanding loans at December 31, 2012 and $132 million or 1.11% of outstanding loans at September 30, 2012. New nonaccruing loans identified in the fourth quarter totaled $38 million, including $19 million identified related to the implementation of the recent regulatory guidance on Chapter 7 bankruptcies. This was offset by $16 million in payments received, $8.0 million in charge-offs and $13 million in foreclosures and repossessions.

Nonaccruing commercial loans increased to $24 million or 0.32% of outstanding commercial loans at December 31, 2012 from $22 million or 0.30% of outstanding commercial loans at September 30, 2012. Nonaccruing commercial real estate loans decreased to $61 million or 2.71% of outstanding commercial real estate loans at December 31, 2012 from $76 million or 3.50% of outstanding commercial real estate loans at September 30, 2012. Nonaccruing commercial real estate loans consist primarily of land development and residential construction loans. Nonaccruing land development and residential construction loans totaled $26 million or 10.49% of all land development and construction loans at December 31, 2012, a decrease of $12 million during the fourth quarter.

Nonaccruing residential mortgage loans increased $17 million during the fourth quarter of 2012 to $47 million or 2.27% of outstanding residential mortgage loans. Principally all non-guaranteed residential mortgage loans past due 90 days or more are nonaccruing. Residential mortgage loans past due 30 to 89 days and still accruing interest, excluding loans guaranteed by U.S. government agencies, totaled $11 million at December 31, 2012 and $21 million at September 30, 2012.

The combined allowance for credit losses totaled $217 million or 1.77% of outstanding loans and 161.76% of nonaccruing loans at December 31, 2012. The allowance for loan losses was $216 million and the accrual for off-balance sheet credit losses was $1.9 million. Gross charge-offs continue to decrease, totaling $8.0 million for the fourth quarter, compared to $8.9 million for the previous quarter. Recoveries totaled $3.7 million for the fourth quarter of 2012. Net charge-offs totaled $4.3 million or 0.14% on an annualized basis for the fourth quarter of 2012 compared with net charge-offs of $5.7 million or 0.19% on an annualized basis for the third quarter of 2012.

After evaluating all credit factors, the Company determined that a $14 million negative provision for credit losses was necessary during the fourth quarter of 2012. Improving trends in gross charge-offs and loan portfolio risk grading across most loan classes resulted in lower estimated loss rates used in developing the combined allowance for credit losses. Most economic factors are stable or improving in our primary markets.

Real estate and other repossessed assets totaled $104 million at December 31, 2012, primarily consisting of $44 million of 1-4 family residential properties (including $22 million guaranteed by U.S. government agencies), $25 million of developed commercial real estate properties, $18 million of undeveloped land and $16 million of residential land and land development properties. The distribution of real estate owned and other repossessed assets among various markets included $29 million attributed to Arizona, $18 million attributed to New Mexico, $16 million attributed to Texas, $15 million attributed to Oklahoma and $13 million attributed to Colorado. Real estate and other repossessed assets decreased by $337 thousand during the fourth quarter of 2012. Additions of $36 million were partially offset by $33 million of sales. Additions included $23 million and sales included $24 million of 1-4 family residential properties guaranteed by U.S. government agencies. Write-downs and net losses on sales of real estate and other repossessed assets totaled $4.1 million.

Securities and Derivatives
The fair value of the available for sale securities portfolio totaled $11.3 billion at December 31, 2012 and $11.5 billion at September 30, 2012. At December 31, 2012, the available for sale portfolio consisted primarily of $9.9 billion of residential mortgage-backed securities fully backed by U.S. government agencies, $895 million of commercial mortgage-backed securities fully backed by U.S. government agencies, and $325 million of residential mortgage-backed securities privately issued by publicly owned financial institutions. Privately issued residential mortgage-backed securities included $202 million backed by Jumbo-A mortgage loans and $123 million backed by Alt-A mortgage loans. Net unamortized premiums are less than 1% of the securities portfolio amortized cost.

Net unrealized gains on available for sale securities totaled $255 million at December 31, 2012 and $281 million at September 30, 2012. Net unrealized gains on residential mortgage-backed securities issued by U.S. government agencies decreased $34 million during the fourth quarter to $239 million at December 31, 2012. The privately issued residential mortgage-backed securities portfolio has a net unrealized gain of $2.3 million at December 31, 2012 compared to a net unrealized loss of $5.3 million at September 30, 2012.

The amortized cost of privately issued residential mortgage-backed securities totaled $323 million at December 31, 2012, down $14 million since September 30, 2012. All of these securities are rated below investment grade by at least one nationally-recognized rating agency. The amortized cost of these securities was reduced during the fourth quarter of 2012 by $14 million of cash payments received and $197 thousand of credit-related impairment charges during the quarter.

In the fourth quarter of 2012, the Company recognized net gains of $1.1 million from sales of $84 million of available for sale securities. These securities were sold either because they had reached their expected maximum potential total return or to mitigate exposure to prepayment risk. Net gains from sales of $209 million of available for sale securities in the third quarter of 2012 totaled $8.0 million.

The Company also maintains a portfolio of residential mortgage-backed securities issued by U.S. government agencies and interest rate derivative contracts designated as an economic hedge of the changes in the fair value of our mortgage servicing rights. Due to changes in residential mortgage interest rates during the fourth quarter of 2012, prepayment speeds decreased and the value of our mortgage servicing rights increased by $4.7 million. This increase was partially offset by a $2.9 million decrease in the value of securities and interest rate derivative contracts held as an economic hedge.

About BOK Financial Corporation
BOK Financial is a $28 billion regional financial services company based in Tulsa, Oklahoma. The Company’s stock is publicly traded on NASDAQ under the Global Select market listings (symbol: BOKF). BOK Financial’s holdings include BOKF, NA, BOSC, Inc., The Milestone Group, Inc. and Cavanal Hill Investment Management, Inc. BOKF, NA operates the TransFund electronic funds network and seven banking divisions: Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust. Through its subsidiaries, the Company provides commercial and consumer banking, investment and trust services, mortgage origination and servicing, and an electronic funds transfer network. For more information, visit www.bokf.com.

Banks can only stay in business by making loans, not turning away customers who want to borrow money. So why does the public believe that banks aren’t lending?

“The truth of the matter is that when things were really bad a few years ago, banks weren’t lending,” said Robert Sarver, CEO of Western Alliance Bancorporation. “The banking business, not unlike other businesses, tend to react and overreact and sometime we react too much when times are good and we lend too much money on too liberal terms, and when times are tough, we don’t lend enough money and are too conservative.”

Banks are a business — a unique kind of business — that is under significant pressure to make a profit like any other like any other business. A typical bank, in healthy years, should earn a return on assets (ROA) of 1.1 percent to 1.5 percent. That translates into an return on equity (ROE), because of leverage, of anywhere between 8 percent and 18 percent, similar to most other businesses.

A bank makes its money by investing deposits into either securities or loans, both of which earn a return. Typically, loans earn more than securities and both earn more than what banks pay out to depositors. Although loans earn more, they come with a credit loss rate that a securities portfolio generally does not have. In 2009, in the depths of the economic crisis, a typical bank had a loan loss rate of 1.73 percent on its loan portfolio, which ate into the profitability of the bank. So what does a bank to do when it incurs such high loss rates in its loan portfolio? It invests in fewer loans.

But that is changing. Banks have increased their lending for four of the last five quarters, but Federal Deposit Insurance Corporation (FDIC) acting chairman Martin Gruenberg, is still taking a ”wait and see if the trend toward increased lending can be sustained” approach.

“Banks are lending today, and most banks have excess liquidity that they would prefer to put out in loans,” said Keith Maio, president and Chief Executive Officer of National Bank of Arizona. “Those that feel that banks aren’t lending are likely those who have had their credit compromised in recent years. Loan demand is down from consumers and businesses particularly, since the recession. The recession has caused many personal borrowers to be more conservative in their approach to leverage. Businesses tend to increase borrowing when their revenues are increasing and they need to finance that growth.”

Sarver said that banks do want to lend, “but unfortunately there is a lot of regulation in our industry, which to a certain degree has stifled long-term growth because our capital requirements have almost doubled over the last five years, so that’s been another barrier to banks lending money.”

As an outgrowth of those regulatory changes, lending standards have tightened in certain consumer loan categories like mortgages, experts said. But while mortgage rules have changed, lending standards for business haven’t seen dramatic shifts.

“Commercial lending standards for owner-occupied real estate and commercial and industrial loans have not changed much,” said Kevin Sellers, executive vice president with First Fidelity Bank in Arizona. “For investment property loans, banks are requiring owners to maintain more equity capital in the properties and higher net operating income relative to the property debt service.”

According to Adam White, senior vice president of credit administration at Biltmore Bank of Arizona, bankers have always used the “Five C’s of Credit” to determine if a business is credit worthy. Those included:
1. Cash flow – history of positive cash flows and probability of recurring
2. Collateral – adequate collateral support
3. Capital – adequate capital to support normal business operations
4. Conditions – what’s affecting the business
5. Character – who are the people behind the business

“In today’s environment, banks emphasize ALL five elements,” White said, “whereas in the past too much reliance may have been placed upon appreciating collateral values under unsustainable market conditions.”

Kevin Halloran, Arizona state president of Mutual of Omaha Bank, said that while there have been shifts in the requirements banks are setting for lending, he sees the industry taking steps toward normalcy.

“I believe lending standards have returned to the original norm,” he said. “In the early to mid-2000s, the banking industry required only limited borrower documentation relating to income and other basic information for residential loans. Now, the industry is requesting proper information to make sound decisions.”

On the business lending side of the equation, “lending standards over the past 10 months have loosened in both pricing and structure for both large and small companies,” Halloran said.

And while some banks have pulled back lending activity, it’s definitely not the case at many Arizona banks.

“Loans at our company have grown 8 percent this year and in discussions with my colleagues at other financial institutions in the Valley, they are experiencing similar results,” said Dave Ralston, chairman and CEO of Bank of Arizona. “Loans are the lifeblood of a bank and at Bank of Arizona. loan growth is our number one priority. We are seeing increasing demand from credit-worthy consumers and businesses in the Valley.”

Halloran echoed Ralston’s observations.

“Over the past three years, we have completed more than $500 million in new loans in Arizona,” Halloran said. “That includes commercial loans and commercial real estate financing across multiple industries, as well as private banking loans and residential mortgages. Our local commercial banking group has provided local businesses with working capital, revolving lines of credit, equipment loans, owner-occupied loans and merger and acquisition loans. Our commercial real estate group has provided loans in industrial, multi-family, senior and student housing, charter schools and multiple other real estate segments. So we have been – and will continue to be – a very active lender.”

A positive result in the changes in lending banks have been forced to examine in the wake of the Recession is that bank have learned lessons that will create a stronger business model for the industry.

“Banks need to consistently monitor their concentrations in all lending sectors and understand they can only provide so much capital to any one industry,” Halloran said. “Arizona’s population grew so much over the past decade that it resulted in a substantial need for real estate lending. The concentration Arizona banks had in real estate negatively affected all Arizona banks. In the future, I believe all banks will be better at managing their overall balance sheet risk as a percentage of capital.”

Recovery is on the horizon, but industry experts are cautious in their forecast as the 2012 economy slowly bounces back.

Looking at Arizona’s recession-starved commercial real estate industry as a whole, 2011 was flat and 2012 is trending just slightly better. So say local experts.

But broken down into its various components, there is a wide divergence of attitude and optimism for the rest of this year.

AZRE tapped key players from a variety of real estate-related disciplines to check their crystal balls and predict whether commercial real estate will soar, slump or stagnate in 2012, and what factors could turn the tide.

InvestmentA plethora of CMBS properties will come due in 2012, and private owners of distressed properties may be more willing to sell, says Jennifer Pescatore, who oversees commercial real estate loans for Bank of Arizona.

There is plenty of money available for the right property in the right submarket and investors with the right credentials, she says.

But except for the multi-family sector and some industrial opportunities, Pescatore isn’t sure values have slipped enough to generate a significant number of sales or new development in 2012.

“Arizona offers a unique opportunity, and it’s a great place to do business,” Suchala says.

This year could be better than expected, Suchala notes, but for measurable improvement in real estate values and transactions, 2013 is a more realistic time frame.

Economic development
Economic development directors by nature are always upbeat about the future, and Chandler’s Christine Mackay has reason to be.

“Activity level since the first of the year has gone through the roof,” she says.

Intel is constructing a new fabrication plant scheduled for completion in 2013 but already keeping a virtual army of construction workers busy. And when Intel ramps up, so do the tech giant’s customers and clients, Mackay adds.

Other healthy growth signals: EBay/PayPal is expanding, building out the fourth floor of its Chandler facility.

In January, San Diego-based developer Doug Allred Company broke ground at the NEC of Price and Willis roads in Chandler for Park Place, the Valley’s first spec office complex to rise from the dust of the recession since 2009.

Phoenix has a lot more old office properties to fill up before any spec projects are likely to appear on its planning agenda, but virtually all the big warehousing/distribution center space has been snapped up, and the city is actively looking for “shovel ready” spots where developers can build more, says Bruce MacTurk, deputy director for economic development.

It’s a good news-bad news scenario, he says.

By mid-January, five large industrial users were looking at Phoenix, but the city had only two buildings with more than 500,000 SF of space available.

There’s even some good news about Phoenix’s languishing retail centers as owners are renovating to reposition the sites, MacTurk says.

While economic development leaders like MacTurk and Mackay are focused on job creation, the fallout from job growth is a healthier, more vibrant residential and commercial real estate scenario, they say.

Construction
“Compared to this time last year, it feels much better,” says Bo Calbert, McCarthy Building Cos. Southwest president. “There are a lot more opportunities to pursue.”

McCarthy’s revenue is up 10%, he says. Key drivers for that spike are healthcare, renewable energy, schools and Native American projects, especially in hospitality and gaming.

But Calbert says he believes there is “more pain to come” before Arizona’s construction industry is back on a solid uphill track.

“To be an Arizona-only contractor is not sustainable,” he says. “There is promise, and more opportunities are coming, but not enough.”

D.P. Electric vice president Scott Muller says he has a backlog of healthcare and military projects to keep workers busy in 2012 — primarily technology upgrades.

And the company is detecting more interest from local property owners and developers, some hoping to entice California data centers and manufacturing operations ready to make a move.

“We’re excited about 2012,” Muller says.

“Those in the real estate and construction industry understand that the current market, compared to three or four years ago, has created a great opportunity to build, move or expand at a significant cost savings,” he says. “In 2012, we’ve seen an increase in our Design-Build/Design-Assist projects because this is where the best value is brought to the owner/developer.”

“Technology is constantly pushing the limits of existing buildings,” says Medici, managing director of SmithGroupJJR Arizona Architects. “And a lot of hospitals are positioning for the future or catching up from the past.”

Architects are tapped for new projects at the conceptualizing stage, and Medici sees good news coming for all commercial real estate sectors, even if the bounty won’t happen in 2012.

“We are seeing several developers looking at mixed-use office/retail/multi-family, especially along the light rail line,” he says. “It’s not as much activity as in 2004, 2005 and 2006, but there are opportunities bubbling up. For two years previously developers were not talking to us. Now modestly they are coming out of the woodwork.”

LEO A DALY architectural firm just completed the Casino Del Sol Resort in Tucson and is currently working on a project with Davis-Monthan Air Force base, says senior architect Rod Armstrong.

There is no pent-up demand for shopping centers or new office buildings, Armstrong says, but the international architecture firm is “always in business development mode,” and the signs are positive.

“We feel the increased level of commitment with potential clients. People are loosening up, and things will happen quickly. We’re hopeful for 2012,” he says.

Multi-family
While interest in and financing for new development remains limited in Metro Phoenix, one sector finding favor is multi-family, fueled by a limited supply and the single-family housing market collapse, says Tom Simplot, Arizona Multihousing Association president.

“Apartment owners are cautiously optimistic due to a rebound in values and rents,” Simplot says.

He doesn’t envision a lot more product coming online in 2012, but in select markets — in Scottsdale, Ahwatukee, and along the light rail line — some projects are moving forward and could be under construction this year and available by 2013.

Luxury condo developer Optima is betting Scottsdale is ready for more downtown-living opportunities.

“Optima Sonoran Village is in an advantageous position because it is the first new residential development in several years and builds on the economic, architecture, and marketing success of Optima Camelview Village,” says David Hovey Jr., Optima vice president. “Construction has started on Optima Sonoran Village with occupancy second quarter of 2013.”

Hovey says financing is still tight and mixed-use projects are iffy because of existing over-supply of office and retail components, but, if there is “only a gradual increase in new product over the next few years, the luxury unit market will remain healthy.”

Healthcare
Medical facilities needing upgrades or expansions to keep up with changing technologies, aging baby boomer needs and unsettled health coverage issues, are providing work for local real estate trades — a trend that will continue throughout 2012.

Cancer- and pediatric-focused projects are already in progress, as are several clinics and rehabilitation centers aimed at bringing cost-effective healthcare into communities, says Sundt Construction’s Russ Korcuska, who has been piloting hospital construction projects in Arizona for two decades.

Still, some of the big players will “sit on the sidelines until the (November) election because of the tremendous effect that could have on healthcare and Medicare. The new congress will be pivotal,” Korcuska says.

Some upgrades can’t wait.

“Healthcare construction is tied to population, and there is a great need to accommodate the baby boomer generation,” says Steve Whitworth, Kitchell’s Healthcare Division manager.

Healthcare construction will see a “slight increase in 2012, as larger organizations prepare for healthcare reform,” he says.

Whitworth predicts a sharper focus on cost-cutting delivery methods and energy efficiency in 2012 both in new development and upgrades to existing facilities.

“Healthcare will remain healthy,” he says.

Solar
Solar power was Arizona’s red-hot growth topic a year ago, with government leaders proffering incentives and touting the state’s virtues to the clean-energy companies looking for a place to grow and prosper.

Then mid-year, solar panel makers Solyndra and Stirling Energy Systems failed, and in December industry giant First Solar said it would slow progress of its under-construction Mesa plant.

So how do some of the state’s solar experts envision their industry’s 2012 prospects?

SRP sees strong demand for solar upgrades in both commercial and residential uses even though it “slowed somewhat” from 2011 when monetary inducements were greater, says Debbie Kimberly, director of customer programs and marketing.

“It’s encouraging to see this demand even at reduced incentive levels,” Kimberly says.

She says she expects interest in solar to continue apace throughout 2012, especially in leased rather than purchased systems.

And APS’ 2012 outlook for solar is “overwhelmingly positive” based on continued strong customer demand, says Barbara Lockwood, the utility company’s director of energy innovation.

“We asked our customers,” she notes. “The customers want solar.”

Installers could second that.

“Our forecast is 100 percent growth over last year,” says Gary Held, Harmon Solar sales and marketing manager. “And last year was the biggest year we ever had on the commercial side.”

But that’s from the perspective of the companies that purchase and distribute solar energy.

The growing global glut in solar manufacturers is squeezing the industry from that perspective, she says, as evident by First Solar’s slowdown and some companies folding.

Lockwood predicts prices will stabilize in 2012, and solar supply and demand will reach equilibrium.

Brokerage
Nobody has a handle on the intricacies of the local commercial real estate industry like the brokers who buy, sell, market and lease properties. Their outlook for 2012 is guardedly upbeat, depending on the type of property and its location.

And overall there was 5.9 MSF of “gross activity,” as plummeting rents prompted tenants to move to classier digs.

Most of the Valley’s Class A offices filled up in 2011, and Class B and C space could see an occupancy boost in 2012, whittling away at the surplus supply, says Chris Jantz, Cassidy Turley/BRE Commercial vice president of research.

But neither Henig or Jantz envision a big drop in overall office vacancy this year.

Empty industrial space was gobbled up in 2011, and that could spur development, Jantz says, but new properties likely won’t come online until 2013.

Retail real estate has been the big laggard throughout the recession, and while Henig doesn’t expect much overall absorption in 2012, he foresees “musical chairs” as retailers reexamine their footprints based on recent consumer trends. For example, the surge in online sales may result in smaller, or at least different, brick-and-mortar space usage and bigger warehousing needs.

Henig also predicts that Phoenix area retailers will take advantage of still-sinking rents to move into better locations in 2012.

Tucson’s prospects are rosy.

“All signals are pointing up for Tucson in 2012,” says CBRE Tucson managing director Tim Prouty. “Our vacancies have improved. We see a positive absorption in industrial certainly, office probably, and some improvement in retail as well.”

A recent University of Arizona study predicting 2.35% average job growth in Tucson for the next five years — a boost of more than 52,000 jobs overall — is nurturing Prouty’s confidence.

And Tucson’s successful wooing of biotech businesses, such as Roche Group’s planned major expansion, “will be a big story in 2012,” Prouty says.

Land
After bottoming in 2009, land sales nationally picked up modestly in 2012 and remained level in 2011, according to Grubb & Ellis.

Through 3Q 2011, land sales were just about even with the same period in 2012 at $13.6B, but the sales mix was different. Through 3Q 2011, industrial land sales were up 133% as the industrial leasing and user-sale market improved to the point where developers began ramping up for the next expansion cycle.

In 2012, according to Grubb & Ellis, expect a modest increase inland sales led by development sites for multi-family projects and distribution centers, which are further along the recovery cycle.

Key concernsWhile all the players envision a slight, if spotty, up tick in Arizona’s commercial real estate market, they say job growth and the global economy are key concerns determining 2012’s prospects.

A couple of local legislative issues also factor into the mix, says Nick Wood of Snell & Wilmer.

Tax assessments paid in arrears for commercial structures built in the mid-2000s that experienced severely plunging values in recent years could hamper sales and renovations of languishing real estate, Wood says.

“If you look at values for 2007, some offices have lost 60% to 70% of their value, and there hasn’t been a corresponding reduction in taxes,” Wood says.

And recent revisions to government property lease excise tax (GPLET) rates for new commercial structures can act as a deterrent to economic development, especially in downtown areas, he says.

Bank of Arizona President Ryan Suchala recognizes the importance of community.

“This is where we live, work and play and in many cases the city where we are shaping our families,” Suchala says. “As a father of three I give my time to better our community because this is where my boys will become men. Last year, Bank of Arizona employees spent close to 450 hours working in our community and I personally became a board member at Arizona Women Education and Employment.”

To show the Arizona banking industry’s impact on its communities, the Arizona Bankers Association (AzBA) produced a brochure titled “Arizona Banks Give Back.” The report provides a picture of the economic and charitable support the banking industry gives back to the communities it serves, and shows the influence banks have on Arizona’s economy.

Arizona Bankers Association is an organization with more than 70 members that works to create a unified voice and engage members in issues that affect the banking industry.

“It’s clear the banking industry has been under a microscope the last few years,” says Lynne Herndon, city president of BBVA Compass. “We wanted to pull our information and be treated collectively as an industry to say we are looking to work with companies to help them with their financial needs.”

Arizona Bankers Association created the “Arizona Banks Give Back” survey in November 2010 to collect a variety of data from Arizona banks. The results were released in February 2011. The 12-page brochure includes statistical data that shows how banks provide financial and social stability in Arizona.

The banks that chose to participate in the survey felt that it provided a good opportunity to change the way people currently view banks. The biggest surprise to Paul Hickman, president and CEO of Arizona Bankers Association, was how high bank lending was in Arizona in 2010.

According to the survey results, Arizona banks lent $5.9 billion in new and renewed commercial loans, and more than $11 billion in new and renewed consumer loans in 2010.

“A lot of the feedback we’ve been getting is ‘Wow, I didn’t realize the volume of lending was that great in this economy,’” Hickman says.

The number is likely higher as only 35 AzBA-member institutions responded to the survey, which only represents 63 percent of the organization’s membership, and does not include information from non-member banks.

In today’s economy, banks are more cautious about lending, but the data proves that Arizona banks are continuing to lend to commercial businesses and consumers.

Arizona banks provide direct loans to help the state government finance public improvements by improving water, sewer and public health facilities and by helping build schools.

Banks pay income tax to help support local communities as opposed to credit unions, which don’t pay federal income tax.

Arizona banks are also putting money into the economy by being a leading employer of local residents. Banks bring high-wage jobs to the local community, and employ more than 42,000 Arizonans.

Wells Fargo Bank was the fifth largest employer of Arizonans in 2010, and the average salary for an employee working at a bank was around $66,625 in 2010.

By providing jobs, banks provide a ripple effect in the community, because employees pay state taxes and are also consumers that put money back into local businesses.

Arizona banks are also doing more than just putting money into the economy. Members of Arizona banks are striving to aid their community through service.

According to the results from the Arizona Banks Give Back survey, bank employees donated 211,615 volunteer hours to community service in 2010, and donated $15.5 million to charitable and cultural organizations.

“Actions speak louder than words,” says Craig P. Doyle, Arizona regional president of Comerica Bank. “We get out and are active in making a difference in our communities. It’s better than just handing money out.”

To show their commitment to the communities they serve, Comerica employees work with nonprofits like Fresh Start Women’s Foundation, Homeward Bound, Junior Achievement, Sojourner Women’s Shelter, United Food Bank, Central AZ Shelter Services and many others.

An effort from Suchala and the Bank of Arizona helped improve literacy across the Valley.

“Last year, we hosted our annual Caring for Kids Book Drive and collected over 14,000 books for children and adults in our community,” Suchala says. “We educate with multiple employees teaching Junior Achievement programs and with educational programs to local school children. Our employees have worked together this past year sorting school supplies at the annual Salvation Army Pack to School Drive, serving food alongside Alice Cooper for the Cooperstown Christmas for Kids event and pounded nails at two Habitat for Humanity events.”

“These are good members of the community,” Hickman says. “These are people that are donating their money and time at philanthropies around the state and they’re trying hard to impart their discipline.”

Arizona banks participate in programs such as neighborhood revitalization, financial education and assistance for the underprivileged.

In 2008, Mohave State Bank created a program called “Junior Bankers.” Three years later, Mohave State bankers are still training children at Jamaica Elementary School in Lake Havasu about balancing accounts, taking deposits and bank rules. Volunteers meet each week with students before school. The program has expanded to three other elementary schools.

In 2010, the National Bank of Arizona donated one of its foreclosed homes in Glendale to Habitat for Humanity Central Arizona. The bank partnered with the organization to help renovate the property, and 118 people worked to build walls, paint and landscape the property.

Arizona banks are committed to helping the community both financially and through service, Hickman says.
“This industry is like the cardiovascular system of our economy and it needs to be robust and healthy,” Hickman says. “We don’t grow or recover without this industry.”

For more information about the Arizona Bankers Association, visit azbankers.org.

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Arizona Gives Back: By the Numbers

More than $5.9 billion distributed in commercial loans (new and renewed) in 2010

More than $11 billion distributed in consumer loans (new and renewed) in 2010

Finance & Professional Honoree: Banks: $900M or more in AZ assets

National Bank of Arizona

Photograph by Duane Darling

With 25 years of strength, stability and profitability, National Bank of Arizona is one of the state’s premier financial institutions. Since its inception, National Bank of Arizona has been there for its customers, continually searching for new ways to help Arizonans meet their financial goals. As a community focused and locally managed bank with the resources of a major financial institution, we deliver industry-leading product solutions, award-winning service and innovative technology. Through our team of more than 1,100 employees, National Bank of Arizona reaches 55 diverse communities throughout Arizona. With this staff of experienced local bankers, we are able to respond to the needs of our customers with flexibility and custom solutions.

The effort, commitment and passion put forth by our bankers to deliver the very best customer service adds new honors to a bank that has been achieving firsts and bests since 1984.

Finance & Professional Finalist: Accounting Firms: 26 CPAs or more

Deloitte & Touche LLP

Deloitte & Touche LLP’s goal today remains the same as it was since it began serving Arizona businesses more than 45 years ago. Deloitte & Touche is dedicated to helping its clients and people excel. Deloitte’s growing and thriving practice — the largest in the state — is the only company that provides Arizona businesses with a comprehensive range of professional services, including assurance, tax, enterprise risk management, management and information systems consulting, financial advisory services, employee benefits and human capital. Deloitte & Touche strives for the highest levels of integrity and public trust, every day, for every client.

Finance & Professional Finalist: Law Firms: 65 Attorneys or more

Greenberg Traurig LLP

Greenberg Traurig offers an international platform built to meet the legal needs of today’s businesses. With 1,800 attorneys and governmental affairs professionals in 30 offices, our combination of wide-ranging experience and onthe- ground resources enables us to provide local insights and legal services in markets across the U.S. and around the world. Our Phoenix attorneys offer clients decades of local experience, complemented by the global reach of the GT network. GT helps clients take on the legal challenges they face today — and prepare for those they may face tomorrow.

It may be true that numbers don’t lie, but they don’t always tell the whole story. When the 2008 fiscal third quarter ended June 30, statewide Small Business Administration-guaranteed lending showed a 25 percent decline from 2007 in both total loans and dollars lent, according to the Arizona District Office.

In fact, District Director Robert Blaney says numbers have been dropping throughout the fiscal year, which is indicative of a slowing economy and business owners holding back.

“I think that we’re feeling the effects like everybody else,” he says. Even active SBA lenders have noticed a slowdown.

“The customers are not expanding as much,” says Dee Burton, an Alliance Bank of Arizona senior vice president dealing with SBA and commercial lending. “The customers are, you know, a little bit leery and they’re not expanding their business. So, yes, that has impacted the number of requests that we get to look at, simply because most of the customers are not in high-growth mode.”

The upshot for small-business owners is that if they need money and can meet certain requirements, financial help is available.

“Here at Alliance Bank, we look at these type of slowdowns, if you will, as an opportunity to help people get a loan to expand and grow with them,” Burton says. “We’re definitely still in the lending process.”

Thankfully, business owners have no better friend than the SBA. It provides resources for those starting new businesses or expanding existing ones. And it has programs for businesses in need of capital.

When it comes to the financial side, it’s important to be clear: The SBA is not a lender. Instead, it works with banks, credit unions or other entities that make and administer loans. The SBA backs up loans with guarantees, which can run as high as 75 percent to 85 percent depending on the amount borrowed and the type of loan.

“For us, it’s a critical program,” says Lori Stelling, vice president and SBA lending manager for National Bank of Arizona. “We can serve so many more customers by givingthem a loan with an SBA guarantee, because the loans that we do under SBA we would not be able to do conventionally. And there’s a number of reasons for that. If somebody doesn’t quite meet our conventional cash-flow requirements, under SBA we can give them a longer term than we can conventionally.”

“For lenders, I would say SBA is a critical part of what we do.”

The SBA has several different loan programs.

The most common is the 7(a) loan, which serves a range of business financing needs with a maximum amount of $2 million. Another is the SBAExpress program. It makes smaller loans available, but the SBA only offers a 50 percent guarantee. One of the newest is the Patriot Express Initiative, a program that helps veterans and others in the military community with funding and training. Established businesses in need of long-term financing for major fixed assets can turn to the 504 program.

Not all active SBA lenders participate in all programs. Some specialize in 7(a) loans; others offer SBAExpress loans as their primary product. They also have varying restrictions and minimum loan amounts. Many lenders refuse to offer loans for start-ups. Also, only certain active lenders are approved for certain programs, such as Patriot Express. And some are given special status. Especially active and expert lenders qualify for the Preferred Lenders Program, which equates to a quicker turnaround on SBA loan applications.

Visit the SBA’s Arizona District Web site at www.sba.gov/az to find a completelisting of statewide lenders.

The SBA loan process is not that complicated. Take your proposal to a lender and, according to Blaney, if the lender is unwilling to do a loan without an SBA guarantee, they will deal with the agency’s loan processing center.

“It’s as simple as that,” Blaney says. “You have to fill out a couple of more forms for us. I mean, it is the government, we do have a form or two. But it’s not an arduous process. And it has been severely streamlined over time.”

Before taking that step, however, Arizona small-business owners may want to take advantage of two other SBA programs: SCORE and the Arizona Small Business Development Network. Their experts can assist with business plans and help you understand lender requirements.

John Alig, branch manager and a counselor for the East Valley SCORE chapter in Mesa, says this may mean passing out what a fellow counselor calls “reality cookies.”

“Sometimes that includes telling people things that they donâ€™t want to hear,” Alig says.

He warns that business owners who lack a proper credit rating, collateral and capital do have one thing: a big problem.